How to Get the Electric Vehicle Tax Credits
Sources: Barron's, BakerAvenue
Electric vehicle (EV) sales are up 127% over the past two years. With the Inflation Reduction Act in drive, the additional federal tax credit of up to $7,500 for EVs and other “clean vehicles,” including plug-in hybrids, will only push the growth further – but you may need to act fast.
In order to qualify for the new tax incentive, there are numerous eligibility requirements to meet, with additional rules expected from the IRS in March.
The Good News
- Some General Motors and Tesla models qualify
- Tax breaks are available for plug-in hybrids
- Credits can be applied on used cars
Plugged In & Revving Up
Sales of EVs, hybrids, and plug-in hybrids have surged, capturing more of the total car market.
Note: 2022 hybrids/plug-ins and total EVs/hybrids are estimates.
Source: Cox Automotive
The Bad News
- Final assembly of car must be completed in North America
- Ultraluxury vehicles are off limits
- Sport utility vehicles, pickup trucks, and vans are only eligible if under $80,000
- Sticker price limit for cars is $55,000
- Income thresholds have been implemented for new and used vehicles
- Additional battery-sourcing qualification requirements are expected in March, which could disqualify most EVs from a full credit
But whether EVs will save you money in the long-term depends on the price of gas and competing cost of electricity. With generally higher prices of EVs, plus repair and maintenance costs, it can take up to six years of ownership to be more cost-effective than a conventional car. Although the tax benefit can help mitigate the cost, the window to capture the full credit may close as early as this spring with the new anticipated requirements.
Read the full details on EV tax credit qualifications: How to Get Your $7,500 Electric Vehicle Tax Credit -- Before It's Too Late
The current tax credit rules are a mix of good and bad news.